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Non - starter

23 September 2016

In a year when May came after June, you might have bet that the Starter Homes initiative would also have landed on the new prime minister's bonfire of George Osborne's vanities. Yet, as the government gets set to announce a paradigm lurch towards ownership in planning policy, our new research into the Starter Homes market raises important questions about whether developers and councils can meet Downing Street's aspirations.

In the next few weeks, the Department for Communities and Local Government will confirm that the National Planning Policy Framework is to be changed so that Starter Homes will form part of councils' affordable housing requirement. Councils will need to achieve a 'quota' of Starter Homes on appropriate sites, including probably rural exceptions. Planners will need to secure Starter Homes as part of their on-site negotiations.

Add in that Starter Homes-eligible households of first-time buyers under 40 can access a 20% discount and settled conclusions about housing demand go out of the window - as our recent research commissioned by a Northern local authority shows.

Using primary research, re-analysis of 2013's Strategic Housing Market Assessment (SHMA) data, Zoopla's database and Census analysis, we found that the Starter Homes discount could potentially bring 82% more households into buying. This constituted a staggering 4% of the total households in the authority. Three-quarters of this new market could afford two-bed properties, with the remainder being able to access three-bed homes via the discount. However, when the level of savings were factored in, the number of potential households fell back by half.

The Starter Homes-eligible households appear to have different aspirations than the SHMA analysis would indicate. Our research found that 60% of an (admittedly much smaller) sample of eligible households sought two-bed housing compared with the majority that sought three-bed properties reported by the SHMA.

As with the previous SHMA analysis, the eligible households expected (but did not aspire) to move to semi-detached properties or terraces. However, the locations they could afford had changed significantly. This suggests that marketing campaigns will need to recalibrate households' expectations of where they might move.

A worrying finding for registered providers bidding for Homes and Communities Agency grant is that hardly any eligible household had considered shared ownership, and significantly, of those that did, only a small fraction considered it a possible option. This is corroborated by other primary research we have undertaken where target households preferred full over shared ownership. While raising the profile of shared ownership will undoubtedly help, the resistance to the product among informed target households suggests that almost doubling the numbers of shared owners in England by 2020 requires a rethinking of the offer.

Our survey of eligible households revealed a limited awareness of the Starter Homes initiative and while the product generally achieved a positive response when explained, there was some scepticism that it was 'too good to be true', that locations would be unfavourable and unhappiness that it was only available for new build.

For housing strategists, there are wider implications. Our analysis found that two-bed Starter Homes would be cheaper than their private rented equivalents. While this price advantage did not extend greatly into the three-bed private market, in discrete communities, Starter Homes developments could very easily create demand problems for private landlords with potential consequences of under-investment and empty homes.

Although Starter Homes are private products, the pressure will be on the public sector to deliver. While our research found the aspiration to own is strong among eligible households, flexibility will be the key for planners and developers seeking to make sense of a brittle post-Brexit housing market.

Derek Long, Director of Housing and Data Consultancy, arc4
First published in Inside Housing 20 September 2016